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Impact of Structural Adjustment Programmes on Social Service Delivery and Human Resource Development

Impact of Structural Adjustment Programmes on Social Service Delivery and Human Resource Development


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the severe effects of saps on service delivery and human resource in developing countries .from (muwongesteven20@yahoo.co.uk)
the severe effects of saps on service delivery and human resource in developing countries .from (muwongesteven20@yahoo.co.uk)

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REG. NO.: 06/U/8064/EVE
CODE: 3214
DATE: 31
MARCH 2008
ASSIGNMENT: assess the role the impact oI structural adiustment programmes on
social service delivery and human resource development
Structural adjustment programmes (SAPs) have been implemented in many 'developing'
countries since the 1980s. They were designed by the Ìnternational Monetary Fund
(ÌMF) and the World Bank and imposed as a condition for further loans. This essay will
give a brief background of the events that led many countries to accept SAPs. Ìt will de-
scribe how SAPs were implemented and what results they have produced on the provi-
sion of social services and human resource development during the last 20 years .
HistoricaI background
SAPs were born as a result of a debt crisis that has hit especially developing countries
since the 1980s. This debt crisis has its origin in the early 1970s when oil-producing
countries that had united in the Organization of Petroleum Exporting Countries (OPEC)
increased the oil price to gain additional revenue. Most of these profits were invested
with banks in industrialised countries. These banks, in turn, were interested to lend this
money to developing countries to finance the purchase of products from the industrial-
ised countries. At that time. both private and public institutions encouraged the South to
borrow. Even the World Bank 'preached the doctrine of debt as the path towards accel-
erated development'. As a result, huge amounts were borrowed by the political elites,
often wasted on luxuries, 'white elephant' projects or stolen by corrupt officials. Very lit-
tle was invested productively with a view of achieving sustainable economic growth
(George 1995: 2.)
By early 1980s most of the countries had sank deep in debt, and continuous borrowing
to repay the loans together of with accumulated interest as a result of the USA increase
of the interest to avert inflation, threatened developing nations becoming bankrupt. Then
the powerful institutions of Breton woods, identified a wide range of conditions and re-
forms to be implemented as a package for recovery from debt .but these have had far
reaching negative effects on social service provision , welfare of human resource and
the general outlook of developing economies
Definition of concepts
Structural adjustment programmes in simple terms refer to a package of economic re-
forms , regularation and conditionalities designed by Washington based institutions of
international monetary fund and world bank(WB/ÌMF) in early 1980.these were meant to
help developing countries recover from economic crisis and debt , which had resulted
from accumulated interest and loans borrowed by countries during the oil crisis of 1970s.
SAPs prescribe the following measures as a condition for new loans.
reduction of government deficit through cuts in public spending (cost recovery
higher interest rates
liberalisation of foreign exchange rules and trade (deregulation);
rationalisation and privatisation of public and parastatal companies;
deregulation of the economy, for example
Human resource development is defined by susan healthfied as a framework for helping
employees , develop their personal and organizational skills , knowledge and abilities .
One of the conditions contained in these adjustment programmes was the condition that
user-fees be charged for sociaI services. The philosophy was that sociaI services are
not universal human rights as commonly claimed. Further arguments by economists
were that public goods/services benefit society as a whole whereas private goods/serv-
ices benefit the individual concerned (Atkin et. al 1987);
SAPs are built on the fundamental condition that debtor countries have to repay their debt
in hard currency. This leads to a policy of 'exports at all costs' because exports are the only
way for 'developing' countries to obtain such currencies. A first feature of SAPs is therefore
a switch in production from what local people eat, wear or use towards goods that can be
sold in the industrialized countries.
PRIVATISATION - of industry and pubIic utiIities
Privatisation in Uganda has resulted in some 350,000 people being retrenched, a failure
to increase industrial efficiency, and, with the private sector not expanding fast enough, a
sharp increase in unemployment. Those laid off were not prepared for life in the private
sector, as no training was provided. Some did not even receive severance packages,
and for all those who did, the packages were too small. One result has been an increase
in informal-sector activity. Meanwhile, among the employed, expatriates have received
the higher-level jobs, leaving Ugandans with the low-level posts. (www.saprin.org)
Unemployment stands at 50% in some sectors and only 16 000 jobs are created per year
for 220 000 school leavers. Since the early 1990s 130 companies were liquidated and a
process of de-industrialisation is underway in a country that once had a relatively self-
contained and integrated economy (Saunders: 8-11).
Privatisation allowed international capital to buy state enterprises at very low costs. the new
owners of the privatized enterprises underpay their employees, offer no job security, and
do not follow labour regulations. among other things employers have defied the country's
Constitution by not recognising trade unions and that any worker seen organising a
union is fired. With the Ministry of Labour reduced to the status of a department, officials
have been unable to do much, and the laws that protect the rights of workers are weak
or non-existent.
The very threat of unemployment has led workers to compromise their rights when em-
ployers do not follow the law. With the economic architects not wanting to slow down the
process of privatisation, employers have proceeded to sweep aside trade unions. Pay-
ment of salaries is often late and, with no limit on overtime, employees are generally
overworked, according to labour representatives. Ìn addition, safety standards are low,
with most privatized firms unwilling to adhere to safety regulations or to adequately in-
vest in plant improvements. There by placing the lives of workers in danger of contract-
ing diseases which might ,hinder their ability to perform and maintain the welfare of fami-
Prior to the start of reforms, Mali's government owned 60 percent of the cotton industry,
which was one of the country's highest grossing exports and a provider of many public
services. However, in 1999 and 2000, peasants, unhappy with questionable manage-
ment and extremely low prices received for harvesting of the cotton, revolted. Ìn 2001,
under some pressure from the World Bank, privatization of cotton and other large indus-
tries took place faster than previously planned. The way in which this privatization was
managed, especially in its speed, disregarded the important role that the cotton industry
played in many people's daily lives. This lead to considerable unrest and the disruption
of transportation of aid, fertilizer, and water and electricity services
The privatisation of electricity distribution in countries like Uganda, El Salvador has re-
sulted in increased rates, reduced access for low-income people and a notable decline in
the quality of service. A lack of transparency in bidding processes and an overall lack of
regulation of the private sector providers has contributed to these negative results.
To pay for increased rates, families have been forced to cut back on other expenditures
and ration their use of electricity. Women often bear the greatest burden of increased pri-
ces because they have greater domestic and child-rearing responsibilities, often in addi-
tion to paid work outside the home. Ìn an effort to ration electricity use, many rural fami-
lies are resorting to more traditional energy sources÷especially collecting and burning
wood÷which contributes to deforestation and generates a significant additional work-
load (mostly for women).
Children have also been negatively affected by price increases, since families have re-
duced their expenditures for education and recreation. Ìn an effort to supplement family
income, children are sent to work, contributing to an increase in child labour And school
drop outs ,there by reducing future chances of securing gainful employment and compet-
The impact of price increases is also seen among micro and small enterprises, many of
which have been forced to close down because they can no longer afford to pay their
electricity bills. the threat of further sliding into poverty for several households deprived
of basic employment and income generating activities in this situation becomes unavoid-
Access to electricity has also been restricted. low-income communities in rural areas
have been hardest hit since the newly privatised electric companies do not see most ru-
ral areas as sufficiently profitable and therefore prefer to export power to neighboring
countries. Such a profit-driven mentality, has overshadowed concerns about quality and
expansion of services. As a result, the quality of service has dropped considerably.
There are regular and prolonged blackouts in some areas, customer complaints are not
addressed, customers are not provided with basic service and billing information, and
overcharging is a common practice.
LIBERALISATION POLICIES - in the areas of trade, prices and the financiaI sector
the agricultural-sector liberalisation policy package÷which included the elimination of
price controls, the abolition of marketing boards, the reduction or removal of export
taxes, the elimination of import controls, and the liberalisation of interest rates and the
capital account÷has led to a steady growth in agricultural output (in part through expan-
sion of land under cultivation), including food production, as well as crop diversification
and increased food security. however, that the terms of trade for food producers had fall-
en, that there have been negative effects at the local, or household, level, and that poor
rural physical and financial infrastructure has limited the presumed benefits of liberalisa-
With the elimination of government extension programmes, farmers have been left igno-
rant of current world trends and prices for crops, and thus are vulnerable to exploitation
by middlemen. This problem is exacerbated by the displacement of small-scale traders,
which is reducing competition in the sector. Ìn addition, with the liberalisation of input
markets, private traders now play the role of extension workers, advising on the farming
methods such as the use of chemicals. The disastrous consequences, is that the returns
for energy provided by farmers in production are minimal and unsustainable for them to
maintain an average life and even be able to send their children to school.
Liberalisation has not turned the terms of trade in favour of agriculture, and relative pri-
ces have not improved for producers in spite of increases in farm-gate prices. Ìnstead,
agriculture and rural production are heavily taxed through high transport prices, due in
part to impassable roads. Petty trading has become a more profitable pursuit, with trans-
port owners profiting from a retail price mark-up in the capital, Kampala, which can reach
ten times the farm-gate price. Reduced profitability for agricultural producers contributes
in large part to the very high poverty level in villages and limits the rural households from
access to basic necessities for life like clothing ,paraffin for lighting among other
Meanwhile, indigenous subsistence crops, such as millet, are disappearing because of
the desire, to produce cash crops such as bananas and maize. As a result, despite the
government's view that there is an abundance of food, malnutrition is increasing in Ugan-
da, according to civil-society organisations. Malnutrition and poor feeding hinders the
ability of children to learn properly and complete the entire course of study. On the other
hand also limites the output of labour due to increased chances of physical weakness.
Furthermore, since women continue to produce the lower-income crops, it is argued that
liberalisation and privatisation have benefited men more than women.
The small and medium-scale industrial sectors are being squized out of production due
to liberalised markets which promote open and free flow of cheap good from especially
highly subsidises Asian producers. local manufacturing, textiles have been out competed
,forced to close and even lay off worker because of the prevail conditions in the market .
for example Small and medium-sized enterprises involved in production and retail serv-
ices in Hungary have been badly hit, and many eliminated, by that country's open-trade
policy. these firms, which employ about 70% of all Hungarian workers, deserve, but have
not received, special consideration. The retail-trade sector, in particular, suffered a crisis
with the arrival of supermarket chains, often from abroad. Without forward linkages to
Hungarian outlets, it was explained, food production is also being destroyed. The entry
of supermarket chains and cheap goods from abroad, facilitated by the privatisation proc-
ess, has distorted national consumption away from local products, like milk, that are of
high quality in Hungary.
Under liberalisation, not only has supply dropped considerably, but domestic demand fell
about 15% from 1989 to 1994, with per capita food consumption down sharply. This drop
in consumption, disposable income and domestic demand is explained by the fact that
some 1.5 million Hungarians have lost their jobs, minimum salaries are being taxed, and
utility rates, pharmaceutical costs, school-related expenses and other household expen-
ditures are all substantially higher because of the country's budget cuts resulting from fis-
cal policy reform.
The liberalisation policies also encouraged increase in the production of cash crops ,as
alternative way of increasing returns from export and attempt to balance of payments
from trade .however this has been done at the expense of food crop production, which of
recent has led to food shortages in developing g country, threatening social welfare of
human resource to effectively deliver.
For example in Ghana it noted that under the country's SAP there has been a shift in
agricultural production, with more land and resources devoted to export crops and less to
domestic food production. This has led to a decline in domestic food production, reduced
food security for the poor, lower agricultural investment, and increasing income dispar-
ities between export and domestic food producers, exacerbating inequalities. The remov-
al of subsidies and cutbacks in social services have had different impacts on women and
men. Women, who produce 60% of food, have suffered disproportionately from the elimi-
nation of subsidies, the drying up of credit and the surge of food imports as a result of
trade liberalisation.
IiberaIisation of the financiaI system
iberalisation of the financial system and its impact on access to credit by micro and small
enterprises. financial sector liberalisation has led to increased intermediation costs and a
reduction in credit for small and micro-enterprises, which is contributing to a concentra-
tion uneven distribution of wealth, widening of the gap between the rich and poor
Since the structural adjustment programme was initiated, active interest rates (charged
on loans) have gone way up, while passive rates (given on savings) have declined.
There is also a problem with special "moratorium" rates, which are imposed on overdue
loans, and the practice of charging interest on the interest on loans. This has forced
many businesses into bankruptcy as their debt spirals out of control.
Another result of liberalising the financial system has been the concentration of credit in
the commercial and service sectors, which now get favourable treatment from financial
institutions. Very little credit is channeled to strategic, although less directly profitable,
sectors such as agriculture (along with other rural enterprises) and infrastructure, and the
role of development banks and agencies that support these and certain industrial sectors
has been considerably weakened. This new breed of profit motivated financial institu-
tions have no regard for those who can not afford services, large number of local poten-
tial entrepreneurs who can not meet the conditions have closed and jobs, livelihood of
many households lost in the process .
since the structural adjustment programme was introduced more collateral is required to
receive credit, and long-term loans are harder to obtain for small-scale enterprises. For
example, artisans have serious difficulties in accessing credit, even when they present
national and international purchase contracts, because the banks refuse to recognise
these contracts as collateral. Women also have a harder time getting credit because of
the strict requirements set by banks. The financial system offers no special programmes
for small-scale or women-owned enterprises, further contributing to the concentration of
credit in the hands of a small number of already favoured businesses and economic sec-
LABOUR MARKET REFORM - increased fIexibiIity for empIoyers at workers' ex-
The policy of introducing more flexibility into the labour market has had a number of neg-
ative consequences for workers and their families. The policy encourages increased use
of temporary, part-time workers, which has made employment more unstable. Work
hours have also become more "flexible", often leading to longer work days with no over-
time pay . For example in El Salvador the firing of union workers and their replacement
soon after with non-union employees. Ìn the countryside, there is an increasing reliance
on temporary day labourers, creating greater instability for rural families. Ìn response,
family members are migrating in larger numbers to already overcrowded urban areas,
exacerbating social and environmental problems. .
The policy of liberalising wages has resulted in declining purchasing power. companies,
take advantage of the abundance of manual labour, do not comply with minimum wage
laws. What's more, increased efficiency and productivity is rarely rewarded with higher
wages. Low salaries and long work days are having a harmful effect on workers' health
and nutrition and making it increasingly difficult for workers to find affordable housing.
More and more children are now entering the labour force in an effort to supplement de-
clining family incomes. These children are usually forced to drop out of school to take
jobs that pay "apprentice" salaries far below the minimum wage, although their duties are
similar to those of regular, adult employees
FISCAL POLICY - user fees and pubIic expenditure cuts in education and heaIth
The implementation of cost-sharing policies for service provision for instance in uganda
indicates major problems of, rendering hospitals and institutes of higher education too
costly for the poor. those who cannot pay for critical health care simply die. Cost-sharing
is also poorly administered in the hospitals. Ìn areas where people are unable to pay, lo-
cal hospitals are closed down and there is low morale exists among civil servants due to
the absence of a living wage, job insecurity and freezes on salaries and wages. Current
budget ceilings also constrain the ability to respond to the need to improve poor quality
Social expenditures in Hungary fell, as did their real value, through 1996. With social
services cut, more family needs have had to be covered by household funds. At the
same time, however, incomes decreased and some 70% of the Hungarian people lost at
least 40% of their real wages. Many are now spending as much as 80% of their income
on rent. Some households went "bankrupt" as their incomes fell, many people are living
off their assets or savings, and many pensioners have been forced out of their homes.
Public expenditure cuts have had additional and far-reaching negative effects in specific
areas of activity, including housing, education and health. Low-cost housing loans have
been eliminated, constraining housing construction despite population pressures. Ìn the
area of social services, cuts in education spending radically reduced teachers' salaries
by 40% from 1992 to 1997 and 8,000 employees were dismissed, undermining the viabil-
ity of the education system. Public expenditure on health-care has been reduced to a
ranking of 21 out of the 26 Hungarian budget sectors, meaning, among other things, that
there is a huge problem due to reliance on out-dated equipment. Finally, public-sector
lay-offs are sharply increasing unemployment among women, many of whom have been
unable to find their way back into the labour market, according to forum participants
Similar circumstances of reduced social welfare and service delivery have been experi-
enced in Ghana the overall quality of the country's educational system has declined
since the onset of the adjustment programme. The imposition of user fees has led to re-
duced enrollment rates, particularly in rural areas. There is a 40% drop-out rate in pri-
mary school, while total enrollment at the tertiary level is under 50,000. Many children
have been pulled out of school to contribute to family income, leading to concerns that
by the year 2020 Ghana's population will be largely illiterate. Ìn addition, user fees have
led to even greater inequalities both between and within communities, as the better-off
increase their educational levels and the poor fall even farther behind. Those families
who do manage to scrape together the money to pay the fees find that they have to cut
back on essential household expenditures.
Retrenchment in the civil service, a decline in the real wages of teachers, relactancy of
government to recruit new teachers in the bid to contain public expenditure have led to
higher student-teacher ratios. Reforms did not address the difficult working conditions
teachers face, which have led to declining morale. Meanwhile, despite of the imposition
of user fees, there is still a widespread shortage of textbooks. These factors, combined
with the imposition of user fees, have led to an erosion of confidence in the public school
system, causing those parents who can afford it to send their children to private schools,
further undermining the viability of the public school system. The impact of these policies
is often more severe for women and girls limiting them to acquire vital skill for their sur-
vival. though women are the poorest of poor, SAP policies have contributed to reduced
education for girls and increased their poverty, often driving them to prostitution and fur-
ther limiting their ability to compete for jobs in future
The quality of health care has also been undermined by retrenchment. There are large
discrepancies in the quality of care between rural and urban areas, as well as a large
north-south divide. Access to services is still limited. Meanwhile, cost-recovery measures
in the health-care sector were implemented at a time when many people had been laid
off and income levels were extremely low. The introduction of user fees has thus led to
reductions in outpatient attendance by up to 33%, particularly in rural areas. Many poor
people are turned away for lack of funds. The payment arrangements are cumbersome,
too much staff time is devoted to collecting fees, and the funds that are collected are
often misused. The poor are simply being priced out of hospital care, and a two-tiered
health-care system now exists, with better facilities for those who can afford to pay.
Once again, women often bear the brunt of these policies. According to official surveys,
poor women access government services and subsidies much less, and the official so-
cial safety net has not helped change this situation.
Tax reforms under SAPs (like VAT) placed a greater tax burden on middle and low-income
groups while foreign capital receives generous tax holidays. large amounts of workers sal-
aries and wages are deducted through other multiple taxes introduced by governments on
advise of ÌMF/WB. leaving workers both in private and public sector with less to spend on a
range of household needs and also for future savings
Not only have the overly rigid and expansive reforms urged by the ÌMF and WB failed to
produce the expected growth and stability, in many areas, widespread anger over the
economic downturn and resulting hardships necessarily associated with these policies in
the short-term caused rioting and general unrest. Ìn January of 2005, the ÌMF increased
the value of added tax in Niger; which taxes the seller at each stage of production. Ìn
March of that year, many people impoverished by the tax organized a massive social
This forced the government to halt the tax increase on milk, flour, and water and electric-
ity for the majority of the public. ÌMF urgings for the implementation of SAPs in Nigeria,
provoked riots in 2000 against these policies and the then newly-elected president who
continued them. Many people were hurt economically by privatization, subsequent price
hikes and austerity policies. These actions diverted money from social services
however it is important to note ,though a lot of undesired results and problems can be
tressed from the saps, there are some positive contributions which have been registered
and their significant impact has led to the transformation of service provision in several
countries. for instance
Ìn Uganda, urban councils have taken advantage of the decentralization reforms by
contracting out certain services allowed to them to the private sector in an effort to in-
crease local revenue mobilization and enhance eficiency in delivery of local services.
There is already evidence that in specific areas, the privatization of markets has pro-
duced some measure of "success¨ (Nsibambi 1995).
For example, Decentralization of Jinja market has enhanced transparency (openness)
and accountability in financial processes through institutionalized checks and balance.
The leadership is held accountable though a process of checks and balances organized
around a series meetings of serviceusers and providers. The annual general meeting is
held once a year and is attended by the vendors, a representative from the council and a
representative from the private firm (GOKAS). Similarly, it was noted that the system
used to tender out the market to a private firm is a transparent one. Under the decentral-
ization framework, every district and later every
DuaI Track Tuition PoIicies
The introduction of cost sharing on provision of social services ,though has to a large
extent led to exclusion of certain sections of the society from access. The introduction of
private sponsored students scheme in high institutions of learning , has opened a door
for students who miss out on state sponsorship programme, in addition there has been
increase in the enrollment of students . the resultant effect is increase in human resource
trained and skilled man power vital for economic growth.
However Governments and university leaders introduced it in form ofdual track tuition
policies in East Africa in order to expand higher educational capacity (and hopefully qual-
ity) without introducing politically unpopular tuition fees upon all students and families. in-
troduced in at Makerere University via the Private Entry Scheme (PES) in 1992 and later
extended to all ugandas public universities. Ìn Kenya, the Makerere model was intro-
duced in 1998 via the self-sponsored, or module ÌÌ, programs
Dual track tuition policies has greatly expended capacity as illustrated by the dramatic in-
crease in enrollment at Makerere University between 1992 and 2002 that grew from
5,000 to over 30,000 students. Makerere University has generated large amounts of rev-
enue from the private entry scheme: increasing from 4,080,059,201 Ugandan Shillings
(US$3,831,000) in 1995/96 to 29,438,099,000 shillings (US$16,510,000) in 2002/03.
However, survey data (Carrol 2004) suggests that the dual track tuition policies do not
increase the access of traditionally underrepresented groups in the absence of student fi-
nancial assistance programs such as means tested grants and student loan programs
and that, in fact, the private entry scheme may even reinforce existing inequities in par-
ticipation at the university.
The above loopholes in the economic recovery policies initiated by the the Breton woods in-
stitutions , should be reformed to reduce on the negative effects they are currently having
on the masses in developing countries. The following measures should be adopted by gov-
Set up regulationary measures to private sector for proper service delivery.
Emphasis should be put on policies that take into non price structural reforms ,insti-
tution reforms to increase democratic practices and accountability.
Regulate capital markets and address unfair trade practices with in the economy.
State intervention is required to determine policies of rural transformation.
Despite the ÌMF and World Bank claims of SAP successes, it is widely acknowledged that
SAPs have failed to achieve their goals. They have not created wealth and economic de-
velopment as unregulated markets did not benefit the poor and failed to protect the delivery
of social services. The ÌMF/World Bank believe that the elimination of protective tariffs will
make domestic industries more competitive. Ìn reality, domestic manufacturing often col-
lapsed and imported consumer goods replaced domestic production.
Hebert jauch. march 1999 structural adjustment programmes :Their origins and
international experience
George, S. 1995: World Bank and ÌMF at century's end. Ìn: Notebooks for Study and
Research 24/25. 1995
Saunders, R. 1996. Zimbabwe: ESAP's Fables. Ìn: Southern Africa Report 11(2), January
Valerie Bieberich 2003 . University of Michigan. Structural Adjustment Policies and
Stability in Sub-Saharan Africa
www.saprin.org .The Structural Adjustment Participatory Review Ìnternational Network,
Atkin J.S, Griffin, C.C. Guilbery, DK and Popkin, B.M.(1987): The Demand for Primary
Health in The third world
Carrol, Bidemi. (2004). Dual Tuition Policy in uganda Prepared for the Ìnternational
Comparative Higher Education Finance and Accessibility Project.
Pamela Marcucci, et al. Higher Educational cost-sharing, Dual-Track Tuition Fees,
and Higher Educational Access: The East African Experience
Nsibambi, A. (1995), The Financing of Decentralization for Good Governance. An Ìnterim
Report on the Project: The Quest for Good Governance: Decentraliza-
and Civil Society in Uganda. Submitted to MÌSR/Ford Foundation
HARRÌET BÌRUNGÌ, Makerere Ìnstitute of Social Research (2000) Local Governance
Service Delivery in Uganda

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